Here Lee Wild, Head of Equity Strategy at Interactive Investor discusses corporate American investment ahead of third quarter reports.

Decent economic data has kept records tumbling on Wall Street, and who’s to say this run will unwind any time soon. Overnight, it’s talk Donald Trump could name Fed governor and market’s choice Jerome Powell as Fed chair Janet Yellen’s replacement that’s driving sentiment.

Winning streaks like this are always difficult for investors, as the head keeps asking how much higher? It requires calm and nerve to hold stocks in these situations, even more to continue buying.

Valuations are toppy in areas of the market both in the US and over here, but history is littered with examples where investors tried to call the market peak and failed. The experts who’ve predicted a crash for more than a year have been wrong, and investors who’d followed their lead will have missed out on substantial profits.

So, there are still plenty of good quality stocks to buy, which are growing profits, pay decent dividends, and have great prospects. That said, corporate America begins reporting third-quarter results in a couple of weeks, and the numbers had better be good, given the size of earnings beats already baked into stock prices.

It’s a big day for ex-dividends in London, among them the third of Next’s 45p special payouts and WPP’s generous interim, which lands highly-paid boss Martin Sorrell another huge windfall.

Even with the impact of ex-divs, the FTSE 100 has significant momentum right now and there’s a great chance it will break above 7,500 soon, putting it within 100 points of a new record. Miners and supermarkets are flavour of the month Thursday.

With little of interest coming out of the European Central Bank’s September policy meeting, it’ll be interesting to see if today’s minutes give any clues as to tapering plans or thoughts about how to handle the strong euro.

After that there’s a jumble of data out of the US, although the chance of any major upset is slim. Many traders could be tempted to keep their powder dry ahead of tomorrow’s US non-farm payrolls.

Below Lee Wild, Head of Equity Strategy at Interactive Investor, discusses dividend cheques and payouts to shareholders over the next month.

Over the next four weeks, some of the UK’s biggest companies will send dividend cheques to shareholders totalling a staggering £8.2 billion.  And the good news is that almost everyone invested in a pension will get something.

Whether directly, or indirectly through a fund or other collective investment, it’s almost certain most of us own a stake in Rio Tinto, Legal & General, SSE, Prudential, GlaxoSmithKline, Diageo, Barclays, Royal Dutch Shell (the largest company on the London Stock Exchange), and Lloyds Banking Group, the UK’s most widely-owned share.

This is a strong reminder that London is home to some of the world's best income stocks. These blue-chip dividends are not only among the most generous, but they are also affordable and sustainable, easily covered by profits and cash flow from operations.

There have been question marks around Royal Dutch Shell. It paid a total of $15 billion in dividends to shareholders in 2016, but the plunge in oil prices from over $100 a barrel to below $30 hit profits. However, the oil major has not cut its dividend since the Second World War, and chief executive Ben van Beurden had been borrowing to maintain that record.

But, after buying BG Group and completing over half its target for $30 billion of asset sales, Shell did generate enough cash over the past 12 months to cover both the dividend and reduce debt.

It’s also great to see Lloyds Banking Group and Rio Tinto back as serious income plays. Both have undergone major transformations following the financial crisis and collapse in commodity prices, and now yield 7% and 5% respectively.

After a six-year break during the financial crisis, Lloyds has successfully repaired its balance sheet and returned to the dividend list in 2015. It’s now expected to keep growing the dividend, and any increase in UK interest rates would be a significant boost to the lender’s profit margins.

Rio Tinto has staged an impressive recovery since the commodity sector crash finally ended 18 months ago, and streamlining the business has provided firepower to increase its latest interim dividend by 144% in dollar terms.

Barclays presents shareholders with a problem. As the only UK bank share in negative territory in 2017 so far, down over 14%, it’s the cheapest high street lender out there, trading at a discount to book value. Its restructuring is complete, too, but PPI and other conduct issues may continue to cap share price gains.

However, if City estimates are correct, the dividend will more than double in 2018 and give a forward yield of over 4%.

With interest rates at a record low, there are currently few asset classes that match equities for income generation potential. The global economy is ticking along nicely, company profits are improving and valuations do not appear stretched among this crop of blue-chips.

In the absence of any market event that significantly shifts the dial, it’s likely investors will continue to benefit as companies return those profits to shareholders.

*Excludes Rio Tinto Limited

Keith Bedell-Pearce, Chairman of 4D Data Centres, here looks at what’s hot in savings and investment FinTech and makes six forecasts for the future.

Financial technology, an ugly duckling with modest beginnings in the back offices of fund management and insurance companies, has now emerged as the black swan called FinTech.

Covering everything financial from pay-as-you-drive insurance (and, scarier, pay-how-you-drive) to crypto-currencies, FinTech is now one of the hottest properties for VCs from Silicon Valley to Shoreditch’s Tech City.

FinTech is not just a single disruptive technology but an entire range of digital processes that are set to transform the historically staid world of financial services.

There are three aspects of FinTech that promise to be disruptive game changers in the UK savings and investment market. Here’s an overview of what that market looks like:

Because of regulation that somewhat ironically came in on the heels of the deregulation of UK financial markets known as Big Bang 30 years ago, there are now high barriers to entry into the UK savings and investment market in terms of increasingly tough and rigorous regulation of the conduct of financial services businesses. This is coupled with equally rigorous capital adequacy requirements.

Big Bang brought about enormous change in how business in the City was done but in an area where God has always been on the side of the big battalions, after some innovation in the late 80s and early 90s, in the last 20 years there has been little real innovation. Product-driven marketing is still the rule in practice despite every provider protesting that the customer comes first. All this is now going to change.

Big players collaborate with FinTech start-ups

The first driver for change is the realisation of incumbent players that almost everything in their store cupboards is past its sell-by date. The nearly complete adoption of digital technology by everyone who has money to save and invest (and lots of people who don't but would like to) means that if the incumbents don't adopt a new approach, they will lose their share of the most profitable sector of the UK economy. The next generation of savers, today’s Millennials, don't have the money to save but when they do, they will expect to manage their money on a hand-held device and will naturally gravitate to the providers who will give them the app to do this.

Although they wouldn’t admit it publicly, many of the big players in the savings and investment market now recognise that they have neither the in-house culture nor the expertise to drive the revolution in the way they run their businesses required to continue to be a market leader in the FinTech digital age.

The answer for the more innovative of these big players is to enter into collaborative arrangements with FinTech start-ups and specialist FinTech consultancies that do have the vision of innovative, low operational cost, customer-focused offerings. Examples are BNP Paribas linking its own Luxembourg-based incubator with ecosystem players Partech Shaker and Paris-based NUMA. Deutsche Bank has a partnership with startupbootcamp FinTech in New York. This is a trend with growing momentum. There seems to be more start-up link-ups and partnerships involving product providers in continental Europe and the US than here in the UK even though many of the start-ups and specialist FinTech consultancies involved are based in the UK.

For the start-up, such partnerships offer a slice of the main action which would be out of reach because of a lack of capital and regulatory know-how.

Blockchain morphs into DLT

The second major driver for change is the almost universal attempts of the world's major banks to harness the huge potential of blockchain technology. Except they no longer call it “blockchain” (presumably because of its association with crypto-currencies) but the much more respectable name of “Distributed Ledger Technology” or “DLT”. Such is the interest in the revolutionary potential of DLT, a global consortium of major banks has been formed in what is called the R3 DLT initiative.

Leaving on one side bitcoin, the original key application for DLT in FinTech was seen as so-called “smart contracts” focused on the front end of transactions in securities markets but it soon became clear that DLT could have relevance to the entire delivery chain of both conventional banking and the savings and investment market. For example, slow and inefficient back office functionality could be replaced by DLT- based processes resulting in major reductions in cost. This applies to fund management businesses as well as banks.

The defining characteristic of DLT is its inherent security of its self-reconciling, immutable distributed databases which also counters targeted cyberattacks and fraud on centralised digital ledgers. Another plus point is it operates in near-real time.

As well as the R3 DLT initiative, most of the major banks in the developed economies have major DLT projects. Some are now moving from the proof of concept phase to practical implementation. Examples are Calastone, a global funds transaction network, with its first phase proof of concept completed in June 2017 and BBVA who claims “first real life implementation” of Ripple’s DLT system.

DLT has the potential to bring about a revolution in the savings and investment market and many other areas of commercial activity as significant as the invention of the world wide web.

Open API the engine of change

The third FinTech driver for change is the Linux-based open Application Programming Interface, generally known as “Open API”, which enables third-party access to banks’ customer data. For the banks, this could be an opportunity to monetise their customer data although there is resistance from some banks, particularly in the US, on the grounds of security and confidentiality.

The technology will enable potential customers to access third-party services within the banking ecosystem. There would also be an opportunity for banks to provide white label offerings to third-party product providers and distributors to access the banks’ customer data.

A UK Open Banking Working Group has been created to facilitate open API. The Treasury is apparently supportive of this innovation and said it would legislate “if necessary”. The working group states “Open Banking will mean reliable, personalised financial advice, tailored to your particular circumstances, delivered securely and confidentially”. At present, giving advice with these characteristics involves long (and therefore costly) fact-finds and this process in practice is a major barrier in the UK to the seamless delivery of online savings, investment and pensions products. If Open Banking delivers what it promises, the effect on both product design and delivery will be as far reaching as the impact of Big Bang on the City 30 years ago.

These are already some implemented examples of open API such as (perhaps not surprisingly) Silicon Valley Bank’s open banking platform “Banking as a Service” and the German online bank, Fidor. There are a lot more known to be in the pipeline and for once, this a technology where Europe might have the edge on the US.

Six forecasts for the future

Our forecasts about the impact of FinTech on the savings and investment market are:

1. Core savings products for asset accumulation and income streaming will continue to evolve slowly until Open ABI goes mainstream.
2. Platforms will continue to play key role in selection of products and client retention with DLT progressively, enhancing speed and security.
3. Advice is key bottleneck in digital delivery; chatbots and robo-advice is likely to appeal to Millennials but they are not yet in the savings groove. Once they are in the groove, the killer app will be on a hand-held device.
4. Technological innovation with most front-end impact will be Open ABI but full implementation is probably at least 5 years away.
5. Open ABI once implemented will be a major catalyst for savings’ product innovation.
6. DLT will have very significant impact on back office costs, security and customer experience and be at a bank or fund manager near to you soon.

One final bit of advice, for those who are involved in savings and investments products, marketing or distribution, now is the time to start networking with the FinTech geeks. They hold the key to the future of this fundamentally important part of the UK economy.

In recent weeks the mainstream media has gone Bitcoin crazy, with articles and segments, raising the profile of cryptocurrencies generally and Bitcoin more specifically in the popular consciousness. This is in part because of recent price rises that briefly took the price to more than US$5,000

per BTC. The question is, is now a good time to buy?

Before embarking on an answer, it is worth outing myself. I have been a Bitcoin investor for almost two years, so I have had the chance to bank some of those 1,000% gains. As you might imagine, I’m a fan.

However, on 1st August, Bitcoin changed in nature and to my amateur investor eyes, it seems that the risk profile has altered dramatically as well.

After more than three years of discussion (read: hostile arguments) online about the way forward for Bitcoin, a change in the code was enacted on 1st August. This is called a hard fork – owing to the fact that the underlying blockchain was split into two. This created a new coin called Bitcoin Cash.

Those arguments, which were quite ugly in places, related to the size of each block in the chain. Being data files, smaller blocks can contain less data than larger blocks. To you and I, that means that less transactions can be processed in smaller blocks. If Bitcoin is to really grow and scale, the argument is that it needs to be capable of handling many more transactions per second than was the case. One side of the debate wanted bigger blocks and more transactions, whilst the other side wanted new software projects that occur “off chain” with the current block size to remain fixed.

The arguments pre-fork were that smaller blocks would make Bitcoin slow and transactions more expensive, while bigger blocks would make the system fast and transactions would be cheap. After a little over one month, the evidence seems to suggest that is likely to be what is actually happening, but it is really too soon to know for sure. Faced with two coins, one that enables transactions within minutes and costs a few cents and another that is many multiples more expensive and takes an unknown amount of time, perhaps more than an hour to complete a transaction, there are many people that believe that most consumers and merchants are likely to opt for low costs and fast processing.

Will Supply And Demand Be Impacted?

These changes come at an important time for Bitcoin’s acceptance. The Japanese government has recently introduced rules to make Bitcoin legal and this year it is being rolled out across bus and railway stations nationwide, plus major shopping chains and into society at large. This, along with many other positive steps suggests that demand is going to continue to head upwards. However, the split of 1^st August will have an impact on the supply side of the new Bitcoin Cash.

Anyone with Bitcoin on 1^st August was able to “split” their coins and create an exactly equal number of Bitcoin Cash. The new Bitcoin Cash uses the same coin creation and halving schedule as the original Bitcoin, meaning that there is a fixed limit of 21 million coins to be created. In contrast to Bitcoin though, there are likely to be a great many people that were not following the debate closely and will not create their additional coins. Who knows how many this may be in total? The reality though is that when added to the number of the original Bitcoin that has already been lost or burned over the years, total lifetime supply is likely to be much lower than 21 million coins. If Bitcoin Cash catches on, this will likely be a future driver of price.

Opinions on the fork differ widely. Finance Monthly spoke to Ofir Beigel, founder of the popular website 99Bitcoins.com. When asked how he viewed the split he told us, “I consider Bcash to be just another altcoin - I'm saying this mainly from a market perspective. The market has spoken in the sense that Bitcoin's adoption and usage weren't hindered by the fork and the emergence of Bcash. Personally I think the results of this fork were a huge vote of confidence for Bitcoin, its maturity and stability.”

How Decentralised Is Bitcoin, Really?

One fear for Bitcoin is that it is not as decentralised as people might think. Yes, there are miners and nodes (processing the blocks) around the world. Yes, coins are owned by funds, companies, investors and traders. Yes, businesses globally are now accepting payments. And on and on. However, because of the nature of its formation, much like modern society, there is a disproportionate amount of power in the hands of a small number of guys (Bitcoin’s early adopters were overwhelmingly male). They came to be known as Bitcoin Barons.

Most of those early adopters bought - and still own – large numbers of coins. This has made them very, very wealthy. Some have used parts of that wealth to launch their own crypto start-ups, invest in other start-ups and coins, launch their own currencies and generally be very involved in the growth of cryptocurrency. This means that this relatively small group of developers and technologists are typically involved in more than one part of the ecosystem and many of them know each other. In other words, they have influence.

How Annoyed is Everyone, Really?

The arguments of the last few years have been very personal and many people have taken offence. Whilst they were all stuck in the same boat supporting one Bitcoin, the arguments could rage, insults be hurled and the show went on. Now that there is a second coin, that is no longer guaranteed.

Ultimately, both Bitcoins are incredibly similar, which means that if a person or business was capable enough to develop something useful for one, it can be applied to the other very easily. In some cases, such as mining, automatic scripts enable switching between the two at a moment’s notice.

Will Both Survive?

This is the crux of the problem. Do all those heavily invested technologists need to support the original Bitcoin when they now have their own Bitcoin Cash to support and grow? The answer is clearly no and the situation is not helped by the previous and ongoing animosity.

Earlier in 2017 consensus formed the New York Agreement when most of the major players agreed to provide support until November, but there is no guarantee that this will be upheld. For all their confidence over the last three years, the developers arguing for small blocks seem to be quite vulnerable. Either or both of heavy selling by the early investors – who we might think of as whales – or removal of services by businesses within the ecosystem could cause major dislocations in the market.

It is not easy to image Bitcoin in a death spiral, it is very likely to survive long into the future. The risk is that the chain does become slow and clogged, transaction times and fees do increase and it becomes less and less usable, with the faster, cheaper and directly comparable Bitcoin Cash available in the market. If that happens and the technologists remove support or sell their coins, the old chain and those amazing prices could be in grave danger.

It is clearly in nobody’s best interests to crash Bitcoin. That would set the cryptocurrency space back several years. Removing support, selling holdings over time and letting the market decide is a different matter though. For both Bitcoin and Bitcoin Cash the next few months will be make or break.

About the author:

Stuart Langridge is originally from the UK and has lived in Malta for 6 years. He has worked as a freelance writer on a wide range of economic and financial topics for many years and now works in marketing for an online gaming company.

A recent report form PwC concludes that UK investment in InsurTech in the second quarter of 2017 surpassed that of the previous three quarters, increasing to $290 million (£218m) in the first half of 2017, compared to $9.7 million (£7.3m) the year before.

Global investment in InsurTech by global insurance firms, reinsurance firms and venture capital companies surged 247% to $985 million.

Mark Boulton, Insurance Sector Lead at Fujitsu UK & Ireland has this to say to Finance Monthly:

“This year has been phenomenal for the insurtech industry in the UK, and these latest figures reflect it. Increasingly, we see the market gaining momentum, and the amalgam of data made available is reshaping the industry in an unparalleled fashion. Investors are coming to much better understand the values that lie within a connected world, from more dynamic customer relationships to personalisation and need for tailor-made solutions.

“Fujitsu’s recent research looking into the UK’s digital landscape showed that nearly 40% of people want the UK to make faster digital progress. As such, insurers need to keep up with the rapidly changing dynamics and unlock the power of technologies.

“Although many insurance companies have digital on their radar, it is important for this industry to take advantage of digital innovation by not only creating savvy online apps and improving the digital elements on the consumer-facing side, but by also implementing digital throughout the business. This will help insurers not only save more, but also become more integrated and process efficient. The amount of deals and investment in the past year are a vote of confidence and now is time UK claims its role as a global insurtech hub.”

In a surprising turn of events, foreign investors don’t seem to be put off by Brexit. In London over 99 financial projects were backed by overseas investment beating out the likes of Paris and Berlin, foreign entrepreneurs are actively seeking out the Entrepreneur Visas to come to the UK.

Globalisation: The next stage business

Expanding business holdings on an international is the move for the 21st century, whether it’s opening a foreign franchise or taking over an existing company, the exploration of a new country’s economy can put businesses ahead of competition.

The UK is currently attracting pioneering business women and men as one of the biggest investment hubs in the Western world, a great international pedigree, and a fantastic business time zone. With over a billion-pound worth of investment in the city of London over the past 12 months, it’s clear to see that over Brexit worries are not slowing down business opportunities,

The Visas

There are many ways to enter the UK but for those looking to pursue a successful career and make the most of the UK economy an Entrepreneur, Visa will definitely be the best option. This visa defined as a ‘Tier-1’ is for prospective business people from outside the European Economic Area and Switzerland who are looking to either set up or run a business in the UK. For those looking to go to the Capital, an immigration lawyer in London would be able to guide through the steps for a successful application.

(Source: Immigration Advice Service)

To many casual observers, this Summer’s football transfer window appears to have left the realms of reality. Transfer fees for players have broken records and the total spend in the English Premier League alone stands at an incredible £1.17 billion and with deals still being thrashed out in boardrooms around Europe, that figure is likely to increase.

Even the managers are aghast, with Arsene Wenger deriding the £200 million transfer of Brazillian superstar Neymar Jr to French club Paris St. Germain claiming that the club “cannot justify the investment.” But are the transfer fees actually the ‘crazy money’ that Chelsea manager Antonio Conte has claimed?

As the three-month Summer Transfer Window winds down, it’s easy to look at the figures that clubs seem to be casually throwing around in player transfers and agree with Wenger and Conte, but there is a data to suggest that clubs are actually spending responsibly and well within their means compared to revenue. Despite the fact that Premier League clubs have already broken the record £1.16 billion spent in 2016, the league remains the richest in the world. It has recently begun its new TV deal with Sky and BT which earning the clubs £5.19 billion, and, in addition to this domestic arrangement, TV Deals from overseas will also contribute £1.07 billion a year currently, with contracts already signed to increase these payments from 2019 to as much as £3.2 billion. If you consider from the last full published accounts of all Premier League teams that there was also another £1.74 billion in revenue from merchandise, gate receipts and prize money, the pot of money available becomes larger, allowing for greater investment as it would in any business. The fact is that these figures demonstrate that the £1.17 billion spent in this transfer market does not even reach 20% of the businesses’ yearly revenue.

The graphic above shows that Manchester United have invested 22% of their yearly revenue into players this summer, which breaches that 20% threshold clubs like to adhere to, however it’s important to note that the clubs do not view the outlay as a short-term investment.  So a £50 million transfer fee may grab a headline and incite mass hysteria on Twitter, but it will be spread out over the duration of the players contract which in most cases is 4-5 years. In some instances the payments are not just lump sums, but are subject to performance and add-ons dependent on the team’s success, which in turn will bring in increased revenues, sponsorship and ideally prize money meaning that the transfer fee may increase from the outside, but in actuality will constitute a lesser percentage of the clubs revenue for that year.

Many clubs have put in place specific player analysis teams to ensure all transfers are in line with the club’s growth projections and business models. Players are investments, so beyond the obvious on-pitch contribution, clubs have developed models to assist in defining the likelihood of creating a significant return on investment that would make the fee worthwhile.

This is also the case in the world record breaking transfer of Neymar widely derided by press, public and football managers alike. If Paris St. Germain were adhering to the standard and historically accepted 20% of revenue ceiling for player transfers, then Neymar should not have been signed as it exceeds that figure by £50 million. But the analysis predicts that Neymar should add over 6 points to PSG’s season tally, which may be enough to re-capture the league title they ceded to Monaco last year, and increase the chances of further progression in the coveted Champions League. Six points and a good cup run is not all Neymar will be improving. PSG have stated that the signing of Neymar Jr is on a five-year contract with the player spending his peak years both on the pitch and as an advertising and merchandise magnet which is likely to increase the revenue of PSG significantly.  Whether it will be significant to cover the investment over 5 years remains to be seen, but it's certainly not as outlandish as it first appears.

The reality is that despite the hysteria and whingeing from opposing managers, the majority of clubs are investing in a way that would be perfectly acceptable in other sectors. And although in the future we will undoubtedly see the first billion pound transfer splashed across the headlines, it will only be when the revenue allows.

Mortgage sales for the UK decreased by £1.8 billion in July, down 10.8% on the previous month, according to Equifax Touchstone analysis of the intermediary marketplace.

Buy-to-let figures were resistant to the general decline, down by just 0.2% (£3.9 million) to £2.6 billion, while residential sales dropped by 12.8% (£1.8 billion) to £12.2 billion. Overall, mortgage sales for the month totalled £14.8 billion, up 10.8% year-on-year.

All regions across the UK suffered a significant fall in sales. Scotland suffered the biggest slump of 19.8%, followed closely by Northern Ireland (-18.5%), and the South East (-15.4%).

John Driscoll, Director at Equifax Touchstone, said: “These figures show how volatile the mortgage market can be. Sales have tumbled in July, with every region suffering substantial declines as buyers are put off by continuing political and economic uncertainty, coupled with the worrying gap between inflation and wage growth. These circumstances may be further compounded by the potential for an interest rate hike as early as September, driven by continued pressure on the pound.

“On a more optimistic note, mortgage sales are up over 10% year-on-year and a dip in sales for July is not uncommon; however, as the summer period comes to a close, the long-term outlook for the market still remains very unclear.”

The data from Equifax Touchstone, which covers the majority of the intermediated lending market, shows that the average value of a residential mortgage in July was £199,286 (2016: £188,115) and £159,721 for buy-to-let (2016: £158,415).

Equifax Touchstone utilises intermediary and customer profiling tools to provide financial services providers with a detailed understanding of their marketplace and client base.

(Source: Equifax)

Big technology brands are proving irresistible to today’s investors, data from award-winning investment game app Invstr has shown.

Experts from the innovative fintech company extracted investment game data from their users in more than 170 countries, and found that, in the six months up to July 31^st, outside of silver and gold, familiar consumer-facing brands such as Amazon, Apple, Facebook and Samsung were the most traded instruments.

Looking further into the data, Invstr found that keeping hold of those big brands could prove a lucrative exercise; the top 10 instruments from the last six months have gone up in value by almost 15% on average.

Plus, the tech companies have been core to that group success. Facebook (27.04% increase), Samsung (23.21%), Amazon (18.67%) and Apple (15.52%) have all experienced hefty growth since February 1, 2017.

Invstr also looked at statistics for the last month (July 3-31) and three months (May 1-July 31), and found that Invstr users were still going strong on the markets with group growth of 8.72% and 4.17% across the top 10 instruments respectively. Tech stocks continued to feature strongly.

Kerim Derhalli, founder and CEO of Invstr, said: “It’s evident from the Invstr data that investors find comfort with the big brands they know and love. Whether it’s the last month, three months or six months, they’ve tended to dominate our top 10 most traded instruments – and it seems to be paying off over longer periods.

“However, everything can change and investors should make sure they are up to speed on the latest price changes and news. Even with growth over the last six months going well, the likes of Apple and Facebook dropped heavily in June before bouncing back in July.

“What we know for sure is that, by gaining more knowledge and understanding of the financial markets, investors can make much more informed decisions which will see their chances of investment success increase.”

Invstr’s top traded instruments

(Source: Investr)

Our July Investment Insight section looks at the work of Jeff Evans, who is a Partner & Managing Director at Volta Global - a diversified private investment group focused on direct investments in venture capital, private equity, and real estate. Volta was formed in 2015 to manage the proprietary and permanent capital of its founder and partners of the firm. Prior to joining Volta, Jeff had over a decade of multi-faceted experience as an active investor in both public and private companies, and as a co-founder of a venture-backed technology company.

Tell us a bit about what makes Volta Global’s philosophy and company culture unique?

Everything about our investment philosophy and corporate culture stems from our permanent capital base. Because we don’t manage a fund or have external investors to answer to, every investment decision we make is viewed through a long-term lens and must pass the test of being undoubtedly the best usage of the two resources we care about most - our capital and our time. Because we are active in so many different areas and maintain a relatively small headcount at the corporate office, our culture remains very entrepreneurial and filled with intellectual curiosity.

Can you give an example of how your personal investment approach has evolved during your career?

Like many people drawn into this field, I’ve always considered myself to be a value-oriented investor. The idea of being one of the first to discover a business with an underappreciated competitive advantage (or “moat”), and that was currently mispriced by other investors, was an idea that captured my interest very early in my life even before I started doing this professionally. As my career has progressed and involved making investments in many different markets, I think realizing how the characteristics of competitive moats themselves can change or adapt over time has been an important evolution. Many elements that defined what a sustainable and durable competitive advantage looked like 10 or 15 years ago may have been drastically altered over time by factors like technology and changing consumer behaviour. Think about large incumbent businesses in the consumer goods space as a good example. For many decades there existed a hugely profitable moat versus smaller upstart competitors – big barriers to entry built up over time thanks to distribution being incredibly expensive and difficult to accomplish at scale, and the advertising dollars necessary to match brand recognition and awareness with the big players being prohibitively costly for most. Fast forward back to today, and businesses like Dollar Shave Club and Harry’s have leveraged direct-to-consumer distribution models and extremely low-cost (but equally effective) marketing efforts to steal almost one-fifth of the razor market from the big incumbents in only a matter of years. I still believe that investing with a focus on the original value principles is the best path to long-term success today, but investors need to be aware and attentive to how sources of competitive advantage can evolve and erode over time.

What types of businesses does Volta look for in your private equity strategy and can you share one lesson you’ve learned from your activity in the lower middle market buyout space so far?

From a high level, in our control investments we are seeking to acquire profitable and durable businesses, each with between $3-10 million in annual cash flow at time of purchase. We tend to like businesses that most people find boring and unexciting, and where we can make them just a bit more exciting. We also prefer situations with an existing management team in place to stay on and operate the business after a transaction, or where we are facilitating a transfer of the business from one generation of family to the next.

The quality of the relationship developed with the sellers or controlling shareholders of the target business is hard to overstate. Not having a proper alignment of incentives in place, or expecting something that starts out as a poor relationship to eventually sort itself out after you have acquired and taken over the business, can be recipes for disaster. For this reason, we choose our partners very carefully based on their track record of displaying integrity and honesty, and we make sure there is personality fit and proper alignment early on in the process process to avoid pitfalls down the road.

Do you have any guidance for how the average investor can improve the quality of their investment decision-making?

Learn from the best. Find great investors throughout history and be an avid reader of their writings, teachings, and experiences. A strong sense of financial market history is also important - what tends to be “new” is often just an old idea that has been repackaged in a different form. Mental models and internalizing a few big ideas from multiple disciplines beyond finance can also be quite useful as an investor. The idea of compounding is powerful, and how continuous, minor self-improvements every day accumulate over time – simple math tells you that a 1% improvement in a skill compounded every day equates to an almost 38-fold total improvement in that skill over one year. Lastly, surrounding yourself with intellectually curious people that ask a lot of questions is a great way to test your own assumptions about the world and continue to expand your own mental framework.

This month Finance Monthly had the privilege to speak to Gianluigi Montagner - the Chief Executive Officer of Malta-based Framont & Partners Management Ltd. In his interview with us Gianluigi tells us all about the services that the company offers, their business strategy and priorities towards their clients, while also providing a rich insight into the investment services sector in Malta.

How are most financial investments structured in Malta?

Malta holds a good reputation as a jurisdiction for smaller and medium financial companies and start-ups. Thus, the fund sector attracts asset management activities all around Europe, being a cost-effective and efficient solution with respect to other jurisdictions that are traditionally experienced in the same field but less appealing from this perspective.

Malta has been able to develop numerous investment funds, which is the main reason why we opted for a full AIF and UCITS licence as fund managers, both targeting professional and retail investors. Framont can offer even the traditional investment services, since we offer services of portfolio management, as well as advisory.

What are the main considerations that need to be followed when providing investment plans to your clients?

The main considerations to be followed always relate to the risk management and the investment objectives. This can either be in terms of target or timeline.

It is imperative to help the clients understand that all investment plans involve some degree of risk, as the reward of taking risk results to the potential for a greater investment return.

Can you outline the process Framont & Partners go through to assess your clients’ current financial situation and assist them with identifying financial goals and concerns?

We perceive it as imperative to hold a frequent and close relationship with each client we have, in order to update their characteristics, understands their needs while trying our best to accommodate them, as well as their personal financial positions. Therefore, this successfully allows us to assist the clients and reach their goals.

Since we are in close contact with our customers and form part of the network in the wealth management markets, trends are identified at an early stage. This is the main reason for offering solutions that are customised for the customers’ needs.

How do you assess levels of risks for investment strategies? How can you accurately assess the level of risk that an individual is prepared to accept?

In order to assess the risk levels, we make use of internal models that are drafted to combine risk profiles and goals. The risk manager assists us on a daily basis and we make sure clients are well informed about the investments in their portfolios by providing regular statements and information upon request at any time.

What strategies do you implement to ensure that your clients’ goals and objectives are achieved?

We always make sure to understand and acknowledge our client’s goals and objectives. Therefore, we periodically review the financial situation of the client and match such strategies and goals. Our team is always available for any needs or questions that the clients or any potential clients might have.

As CEO, how do you ensure you are directing the company in the correct direction? How do you advise your team to make the correct decisions for the company alongside clients?

As the CEO, I make sure that the company’s direction is assessed very often, in terms of competencies as internal goals. We also check closely the reference market in order to promptly meet together with the regulation requirements and the clients’ needs. Turnover may be possible but generally, the employees on board portray a desire to remain with the company. I think this is a signal of a positive and growing environment for the employees and the partners.

About:

Gianluigi Montagner is the Chief Executive Officer of Malta-based Framont & Partners Management Ltd. It is one of the main players for wealth management market and a well-developed and growing reality in the Maltese Financial marketplace. The Company holds a Category 2 Investment Services Licence, allowing a wide variety of products and services, including outsourcing services, structuring, coordination of fund launches, investor relations, investment management, as well as distribution services for investment funds from Malta.

Thanks to the wide ranging financial background of the Company’s founders and the support of a highly specialised team with a deep knowledge of today’s constantly evolving markets, Framont places particular emphasis on stability and flexibility. Its solid structure means that the company offers personalised investment services, which are in tune with the expectations of even the most demanding of customers.

As a Fund Manager, Framont is able to establish different ad hoc sub-fund types for the management family assets or for the implementation of particular investment strategies. The firm also offers support within the evaluation of investment strategies proposed by private customers, institutional or advisory to attain the product that best suits them.

The Company’s task is to be able to switch between being a facilitator of communication, to a supporter of the observance of agreements, rules and intensive choices. Furthermore, it aims to facilitate in the process of the transitions and handover of corporate assets in the least traumatic and linear way possible.

“Framont & Partners Management Ltd aims to be a key market player within the financial markets where independency, quality and efficiency are met at all times. Excellent results mean satisfactory clients, team and partners, led by a professional approach and guidance.”

Website: http://www.framontmanagement.com/

What’s stopping you from investing in property, or more property? Is it a lack of finance? If so, you’re probably looking at things the wrong way. Here Mark Homer, Co-founder at Progressive Property, fires out 5 quick tips for your joint venture pitch.

It’s no secret that joint ventures (JVs) are the key ingredient for building a healthy property portfolio. What is more of a mystery, however, is how you actually secure JV partners.

While the property experts are all shouting about the importance of JV deals, you’re left wondering how to make yours a reality.

Never fear, it’s all about the pitch, and we’ve got five top tips for nailing yours right here.

1. It’s likely you only have a brief opportunity the first time you meet, at a networking event for example, to capture their imagination and grab their attention. Make sure you do so with something unique and compelling. Bear in mind, too, that investors invest in people, so you are an essential part of the deal. Be likeable.
2. Private investors are pitched to every day. Clarity is always better than persuasion, so make them aware of the need to do business with you. Identify their pain point and actively promote a remedy. Speak in their language and focus on being understood.
3. Offer them a unique solution. A profit share in the cashflow and equity. Differentiate yourself by your unique value – what can you offer that no one else can? (Investors aren’t keen on ‘me too’ ideas).
4. Every investor is sold on perceived capability. You can build this by displaying positive examples of your determination and ability to get the ‘job done’.
5. If a potential JV partner is interested, offer to buy them lunch so you can talk more about your property investment proposal. With any luck, this will be the start of an everlasting and successful JV relationship.

Bonus tip

Don’t be afraid to show your passion and enthusiasm – it could be the difference that makes the difference and gets you another conversation.