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New way to measure value of money

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The traditional approach to private wealth management is ‘misguided’ and retail investors should adopt portfolio optimisation techniques used by institutional investors, according to a new report from a European equity house.

The study from EDHEC-Risk equity management found that while private clients are routinely asked all kinds of questions about their current situations, goals, preferences and constraints, the resulting service and product offering most often boil down to a rather basic classification in terms of risk profiles with no link to the recommendation.

The study suggested that by using asset-liability management (ALM) advisers could ensure private wealth managers are able to offer their clients investment programs and asset allocation advice that improves the probability of meeting their individual objectives.

It said taking an ALM approach to private wealth management generated two main benefits, the first of which was better asset class selection, the second being better risk definition.

Lionel Martellini, scientific director at EDHEC-Risk and one of the co-authors of the study said: “The proximity to clients is often seen as the raison d’être for private wealth management. Yet when it comes to tailoring an investment strategy, investment advice often comes up short because it does not really take into account the private client’s true objectives.

”Obviously, one should not manage money in the same way depending on whether the client is planning to use the money to prepare for retirement, to purchase a real estate property or to pay for the kids’ education. Failing to properly account for what the money is needed for leads to misguided private asset management advice.”

Published in the Financial Times

Written by Magda M Ali

February 16, 2010 at 11:58 pm

Elastic share price at GoIndustry

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GoIndustry-DoveBid, the industrial equipment and machinery auctioneer, said it did not know why its share price rose 40 per cent on Thursday, only to fall back 30 per cent on Friday.

The company issued a trading statement in response to its share price nearly doubling over the past two weeks on the back of takeover rumours.

GoIndustry-DoveBid confirmed that it is considering placing at a new equity at a “considerable” discount’ to its closing price on Thursday.

Jack Reinelt, chief executive, told the Financial Times: “We do not know of any legitimate reasons for the price change.”

The group has been reviewing the company’s funding needs and is exploring various possibilities to strengthen the balance sheet.

Mr Reinelt added that the group predicted a positive second quarter. “A lot of restructuring and a fair amount of cost cutting has reset the fixed cost base,” the group has cut £6m ($10m) of annual costs during the first quarter of 2009.

GoIndustry, which bought its US rival DoveBid last year, had been hit with a pre-tax loss of £28.9m last year.

While Mr Reinelt predicted that the “extremely difficult trading conditions continued through the first two months of 2009”, he said the group expected another loss as trading conditions of 2008 will offset the success of the second quarter of 2009.

GoIndustry-DoveBid shares fell ¾p to 1.88p.

Written by Magda M Ali

January 21, 2010 at 11:51 pm

Posted in Uncategorized

Trendspotter: Intricate tables

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Designers concerned with sustainability are refashioning the concept of “less is more” to “more from less”.

Take, for example, the striking 4foldlow table (pictured right) designed by George Rice for Formtank. Like the entire 2d3d group of tables to which it belongs, it has been reverse-designed from a standard-sized sheet of steel in order to optimise yield. Its sophisticated concept traces its roots to the Japanese art of origami. This design approach bears eight tables from one sheet of steel and limits waste to just 3.5 per cent overall, while the intricate forms create the illusion of there being more metal than there actually is.

Meanwhile, a stunning new collection of tables, the Lazerian “Mensa” designs by Liam Hopkins and Richard Sweeney, uses birch plywood components to support glass tops. Thin pieces of plywood are sculpted using a router controlled by a computer. The curvature of the plywood base is reminiscent of a basketball net and the filigree design appears impossibly fine to be able to support the weight of the top. Lazerian will launch the collection at 100% Design in London this month.

Published in the Financial Times

Written by Magda M Ali

January 16, 2010 at 10:56 pm

Terra: Tales of the Earth

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In Terra, Hamblyn fuses history and science to explore the relationship between the earth and its inhabitants. The book is in four key sections – earth, air, fire and water. In each he explores a historical disaster through first-person accounts: the Lisbon earthquake of 1755; the European weather panic of 1783; the eruption of Krakatau in 1883; and the Hilo tsunami of 1946.

Hamblyn muses on the earth’s deep connections: each of these events was precipitated by another natural disaster – a volcano caused both the tsunami and the strange weather, for example. These testify to the planet’s energy, but is life on earth sustainable in the face of such devastation? Searching for an answer, he wonders why humans are unable to learn from past catastrophes.

Despite fascinating material, at times Terra reads as a stream of blurred facts rather than a sustained narrative or argument.

Published in the Financial Times

Written by Magda M Ali

January 16, 2010 at 10:54 pm

Investors over exposed to UK stocks

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Nine out of 10 independent financial advisers have said investors are over exposed to the UK stock market, according to Ignis Asset Management.

The survey of 180 advisers in late August revealed almost half thought investors were ’definitely’ over-exposed to domestic equities. Forty-two per cent admitted investors were ’probably’ over-exposed.

Jonathan Polin, director of Ignis Asset Management, said: “Investors traditionally have a home bias when choosing funds but it is startling to discover that so many advisers believe UK investors are over-exposed to UK equities.

“It is clear that investors need to rethink their strategy and seriously consider whether their existing asset allocation is likely to deliver the performance they need in order to meet their retirement objectives.”

Meanwhile, 58 per cent of advisers said they did not believe we are in a bull market, with just 5 per cent saying we are ‘definitely’ in a lasting bull run.

The study suggested that advisers ‘bearish’ views were reflected in their gloomy predictions for the UK stock market for the remainder of the year. The majority predict that the FTSE 100 will close the year below 5000, slightly under its current level. Over half believe the FTSE 100 will close 2009 between 4500-5000, and a further 26 per cent predict a close of between 4000-4500.

”After such a tough period for us all it is encouraging to see that advisers are feeling fairly bullish about their business levels, if not about the UK stock market,” added Polin.

“Investors are clearly recognising the value of advice and seeking help when making decisions that could have a serious impact on their future.”

With UK equities set to disappoint in the short term and current asset allocation levels failing to close pension shortfalls, advisers were asked their opinion on how best to help solve the looming retirement crisis.

The research suggests that greater emerging markets exposure will help solve the pension’s crisis, as 83 per cent of advisers believe that greater exposure to emerging market equities is likely to play a key role in closing pension deficits, while 73 per cent admitted they typically allocate less than 10 per cent to the sector.

Almost a quarter of advisers said they allocated 11-15 per cent to emerging markets and a further 3 per cent allocated 16-20 per cent.

The research also demonstrates that the areas to which advisers may allocate a greater percentage in the future to include Asia Pacific, emerging markets and the US, which are the three sectors IFAs expect to perform best over three and five years.

“The fact that advisers expect business levels to rise over the coming months is further proof that investor sentiment is improving,” said Polin.

Published in the Financial Times

Written by Magda M Ali

January 6, 2010 at 11:23 pm

Posted in Published pieces

Second home owners benefit from a falling pound

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The collapse of sterling against the euro will hit people going on holiday to the eurozone but it will benefit those with second homes abroad that need to bring euros back into the UK.

Sterling fell sharply against all major currencies on Friday to hit a five month low against the euro of €1.0946 after Mervyn King the governor of the Bank of England said that a fall in the exchange rate would help to balance the UK economy by giving exports a lift.

“The one thing everyone is agreeing on is that sterling is likely to fall fast and far,” said Peter S Ellis, chief executive officer at Foreign Currency Direct. “While this is bad news for most of the UK, those doing business overseas, or people with second homes looking to convert their Euros back to Pounds can get the best rates around.”

He says that the view that sterling will collapse is “supported by the Bank of England who state in the current quarterly bulletin that the UK has been running in deficit for some time which has only been possible due to foreign investment in the UK. This is now suddenly drying up.”

He added that concerns over the sustainability of the level of public debt, which has increased over 20 per cent in a year, and now stands at £804bn, are weighing heavily on the value of sterling.

“Servicing the national debt now equates to £1 of every £4 spent by Gordon Brown’s government and 57.5 per cent of the country’s annual output,” he said.

The pound was down around 0.8 per cent against the dollar, with a day low of $1.6171. Against the Australian dollar, sterling fell 1.3 per cent, hitting a day low of 1.8503. It also fell against the New Zealand dollar by 1.3 per cent, slumping to a day low of 2.2358.

Duncan Higgins, senior analyst at Caxton FX, said: ”As a chiefly importing nation, Britain’s current account has become accustomed to showing a deficit, which has now been proven to be an unsustainable course for the UK economy.

”Mr King’s comments underline the need to focus more on exports. In order to achieve this, a weak pound is necessary to assure the competitiveness of those exports in the global markets, so clearly Mr King has no desire to see the pound gain value.”

Higgins predicted that the pound would continue to decline steadily over the short term, heading towards parity against the euro by the end of October.

Peter Ellis also believes this. “As confidence returns to the rest of the world economy, this position is reversing, investors are once again confident enough to move to riskier currencies. This may see the pound dip against a basket of currencies over coming months.”

Published in the Financial Times

Written by Magda M Ali

January 1, 2010 at 11:50 pm

Demand for housing continues to rise

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The housing market has entered the summer months in a far stronger position than 12 months ago, according to a new report by the National Association of Estate Agents Housing Market (NAEA).

The research shows an increase in the number of house hunters in the market. The number of house hunters registered with estate agents increased from 192 in July 2008 to 292 in July this year.

After dipping slightly in June the number of people searching for property rose again in July. The past three months as a whole represent the largest three-month demand in property since September-November 2007 and could represent the fact that people believe lower house prices can deliver a bargain but also that they consider the market to have bottomed out.

“Prices are gently on the rise as demand outstrips supply especially in the first time buyer end of the market,” says Martyn Gerrard, chairman of the London NAEA branch. “Building society surveyors have appreciated the situation and are no longer down valuing for mortgage purposes although the increased demand for funding has meant that the time taken from application to offer is often several weeks.”

NAEA say that relative to last year’s low, this year’s figures may still be taken as a positive indicator and further evidence that the market is moving towards recovery.

“July has seen recovery in the housing market continue, but it is still a very sensitive recovery,” says Ricardo Copus, chairman of Devon NAEA branch. “Assuming no national or international disasters occurring before the end of the year, the percentage of transactions should continue to increase slowly.

As seasonal activity picks up after the summer holidays and buyers make their way through the system, NAEA predict that the number of properties available for sale will increase.

“We certainly have a “feel good” factor at the moment and any time you year estate agents whingeing about “lack of stock” the market must be good,” says Des Rowson, chairman of the Essex NAEA branch. “The shortage of properties coming on the market means prices are beginning to edge upwards in most areas.”

Published in the Financial Times

Written by Magda M Ali

December 17, 2009 at 9:14 pm