28 October 2010

Governments wage war on savers?

Not only are taxes on investment income excessive in many countries but governments who support 'Quantitative Easing' (Cleartext: Money Printing) also threaten the very survival of thrifty pensioners and savers who rely on fixed incomes from their investments.

How much fees should you pay for a hedge fund investment?

In order to attract investors still smarting from losses incurred during the credit crunch and stung by what some see as unfair treatment by funds, some hedge funds have resorted to offer more flexible fee structures than the traditional 2 plus 20 formula that was the norm until recently. But are they a big enough move or should investors demand more than just a few percentage points off the performance fees (while at the same time being asked to commit their money for ever-longer periods)? If anything, required returns on investment should be higher in the case of illiquid investments and having to wait up to five years before being able to access one's money is not to every one's taste.

22 October 2010

Are you ready for FATCA?

A major US investment bank was famously described as 'a great vampire squid wrapped around the face of humanity' but we would say that this description much better fits the US government. The recently enacted 'Foreign Account Tax Compliance Act' is another step back into the time when a citizen was treated more like the property of the ruler and could be taxed at will. Other countries would be well advised to prohibit their institutions from passing on any information to authorities in a foreign country. The whole idea of sovereignty of states is at stake when one country is allowed to apply its laws in other jurisdictions. If the US wants to make sure that it's citizens are complying to all tax laws the authorities are well within their rights to close the borders for capital leaving the country. From a practical point of view, FATCA means that investors have to take even greater care when selecting a financial advisor. Non-US investors are also in danger of being compromised by information flowing too easily from a compliant bank or money manager to the US authorities.

15 October 2010

Fund of Hedge Funds - A critical view

A study of the performance of Swiss Funds of Hedge Funds throws light on the performance of a product that is increasingly recommended by Fund Managers and used in the construction of private client portfolios.

Ski Jumping, Soccer and Private Banking Advice

Do you know what the connection between these three items is? If your first reaction is: not much! then you are on the way to understand that you have to treat all kind of advertising by the financial advice industry with caution. The fees that are spent on 'image advertising' may be a welcome windfall for the 'personalities' involved in the publicity campaigns but - apart from indirectly being a charge on your investment performance - they will do little to make sure that the return on your investments is as good as it should be.

13 October 2010

Don't mess with 'J.R.' - Larry Hagman wins arbitration case

News that actor Larry Hagman has won an arbitration award against the employer of his former financial adviser illustrates the importance of supervising the activities of any adviser. In this case Hagman and his wife were sold an expensive (and possibly unnecessary) investment 'product' and their portfolio was subjected to substantial turnover which implied a high level of fees and commissions. The case also illustrates that is is not enough to rely on the image/reputation of the employing bank or fund manager - sponsorship of sports or cultural events is no substitute for performance. Careful vetting of any new adviser should also be conducted and include the use of references and all other available information.

6 October 2010

Formula 1 Driver as Private Banker?

Pedro de la Rosa has been appointed as figure-head for the new brand 'Santander Select' that is intended to cater for private banking clients with substantial assets. The battle for the opportunity to manage the money of the well-off threatens to become farcical when reputable and large banks such as Santander turn to sportspeople in order to increase their appeal to potential customers. Investors are well advised to remain sceptical about such (expensive) methods to attract their attention and instead focus on performance, costs and risk when analysing their existing or prospective investment advisers.

1 October 2010

Fraud even the Specialists may find a challenge

The full complaint by the SEC against a hedge fund manager demonstrates in all its 46 pages how difficult it is even for specialised lawyers and auditors to detect fraud that may be perpetrated by intelligent and determined individuals. Every protection against abuse is only as strong as the weakest link and investors are well advised to get all the protection they can get.