Hollingsworth Magazine Article

The versatile portfolio manager

myth often observed by investors is that in order to spread your risk into more sophisticated investments and alternative strategies requires substantial capital. The reality is that you can gain exposure to hedge funds, managed futures and structured notes etc at very low entry levels so long as you have a portfolio manager who is able to pool investors’ capital.

Historically, a typical investment portfolio would consist of overseas and local equities (typically bank shares), bonds (including emerging markets) and possibly equity or bond fund(s) from an overseas company registering their funds in Malta. Whilst the choice in the local market is improving, liquidity issues remain a concern and an investor is not diversifying enough away from the local marketplace. Given the choice, most investors would prefer to invest in global opportunities, if the risks and prospects are properly explained.

A diversified portfolio
Having your capital protected is very popular, especially to the new investor. Some of the local banks offer such products on mass and clients can participate in this ‘plain vanilla approach’. But what if the investor wants to invest in gold or oil or the Brazilian stockmarket as opposed to the traditional standard FTSE or Eurostoxx offerings ? Can his advisor do this for him and protect his capital also ? Typically the response is negative as minimum levels for such structures are often in the region of €1 million. If on the other hand, your advisor or portfolio manager can gain access to international banks then the door is opened to a world full of choice. Whereas the minimum trade may be €1 million, the manager can pool individual trades, often from as little as €10,000 then place the one aggregate trade of €1 million.
The same principle applies to many hedge funds or alternative investments. Often perceived only for the rich and famous, investors can now trade from low levels if their manager has a good relationship with the fund managers. Having a sizable asset base allows the manager to bring in new investors who piggy back onto the fund without having to commit large amounts.

Exchange Traded Funds
If you do elect to invest internationally, a mistake often made by investors is to only consider investment funds from recognised banks and financial institutions. There is however a much cheaper, easily accessible ways of investing into almost any global stockmarket, commodity or currency in the world. Exchange Traded Funds (ETFs) and IShares are used by many portfolio managers to allow them to trade intra day without surrender penalties or lock in periods like many investment funds. Imagine therefore the following hypothetical portfolio :

Commodities Equity Indices Alternatives
Gold Bullion ETF IShares Brazil FTSE100 Autocall 11%
Short Silver ETF IShares Eastern Europe Blue Chip Income Note 8.1%
Leveraged Crude Oil ETF IShares Australia 3 Year Phoenix Note 18%
Grains ETF
Global Nuclear Energy ETF


The above contains a truly global exposure to commodities, equities and income notes, the latter being in the form of structured income notes that pay a fixed income with inbuilt capital protection. To the average investor, the use of ETFs and IShares will be unheard of but they are a fabulous way of investing cheaply and effectively into almost any market you choose. You avoid initial fees that you incur with fund managers and also they also carry a much lower annual management fee.

A portfolio manager’s job is not only about performance but controlling costs also. If he can give the investor a truly international portfolio that includes alternative investments, capital protection and the use of low cost trading tools then the investor is really getting a portfolio that may be perceived to require a very high capital investment. In reality the manager could offer his services and give a diversified approach for in the region of €50,000 upwards – therefore appealing to a lot wider clientele and not just the super rich.



Mark Hollingsworth, Director, Hollingsworth International Financial Services Ltd
Tel: +356 21316298
e-mail: info@hollingsworth-int.com
Website: www.hollingsworth.eu.com

Authorised by the Malta Financial Services Authority to provide investment services, license IS/32457

Hollingsworth Daily Post

• Investors are waiting for the outcome later of the Federal Reserve's policy meeting, which will indicate how the central bank views the US economy.Financial markets have priced in possible stimulus measures. However, economists are split over whether the bank will take action now.One Fed option is to start buying up Treasury securities again - an action last taken during the financial crisis.In July, Fed boss Ben Bernanke said the outlook was "unusually uncertain".


• Tata Motors has reported a return to profit thanks to strong domestic demand for its cars and increased sales of its Jaguar and Land Rover brands.Net profit for the three months to the end of June came in at 19.9bn rupees ($429m; £273m), compared with a loss of 3.3bn rupees a year earlier.Revenue grew by 64% to 271bn rupees as car sales in India grew by more than a half, to 77,858 cars.


• China's import growth slowed in July, which economists are seeing as a sign that the country's rapid economic expansion is cooling.Imports climbed by 22.7% compared with a year ago to $116.8bn, well below the 53% expansion seen in June.However, exports rose by 38.1%, from June's 35.2%, as China's trade surplus increased.There are worries that if China's demand for imports slows it could hinder the global economic recovery.


• Shares in Europe's biggest travel operator, TUI Travel, have fallen 8% after the Thomson Holidays owner said several factors had hit its UK trading.These included airspace closures due to volcanic ash, good weather encouraging people to stay at home and uncertainty about the impact of government cuts.As a result, booking volumes were about 10% lower in the three months to the end of June compared with last year.This meant revenue fell to £3.4m, down from £3.6m a year ago.


• The UK's trade deficit narrowed in June by more than expected after exports rose sharply from the previous month.The deficit on goods and services fell to £3.3bn, against £3.8bn in May, the Office for National Statistics said.The goods deficit was £7.4bn, compared with £8bn a month earlier, largely due to a £900m boost to exports. Trade in services produced a surplus of £4.1bn.

BBC Business News 10th August 2010

Weekly Market Summary

By Raymond Chatlani

On Monday, Asian indices were up after South Korea's exports grew faster than expected and China's manufacturing data confirmed that the economy was growing at a lesser pace which heightened expectations that the Chinese Authorities would now relax policy tightening measures. European stockmarkets also rose on strong manufacturing data, HSBC's reported doubling of profits and BNP Paribas profits which also exceeded forecasts. US markets also appreciated on news that the index of manufacturing activity for July was better than expected.

On Tuesday, Asian equities rose for a second day following the previous day's rally in European and US markets. EU and US indices fell on a report showing that US personal income and spending was flat in June and that pending sales on previously owned home fell to a record low.

On Wednesday Asian equities fell on US economic data. European indices were mixed while US markets rose on reports that the US added more workers in July than forecast and that the services sector is expanding.

On Thursday, Asian markets were mixed due to reports that the Chinese Government would stress test local banks. European and US stocks dropped on an unexpected rise in weekly US jobless claims which underscores a weakening economy. As expected, the Bank of England and the EU Central Bank kept base interest rates unchanged at 0.5% and 1% respectively.

On Friday, Asian stocks closed mixed as investors waited for the results of US non-farm payroll figures. European and US indices fell for a second straight day as private employers in the USA added a total of 71,000 only in July, far below the 200,000 jobs needed every month to reduce the unemployment rate.

A lot of mixed signals and markets were flat this week. The employment figures out of the US confirm that although the economy is growing, it is slowing down.

In previous weeks we have seen good earnings reports from companies which is due to cost cutting rather than an increase in sales. This weeks employment and jobless claims data confirm this. Until a clear trend emerges, the risks of getting back into this market are still elevated.

The markets will be driven next week by the results of the Federal Reserve Bank meeting on Tuesday. Investors should react depending on whether the FEDS do nothing or introduce new stimulatory policies.

Hollingsworth Daily Post

• Royal Bank of Scotland's pre-tax profit has risen to £1.14bn in the first half of the year from £15m a year earlier.The bank reported an operating profit of £1.6bn compared with an operating loss of £3.4bn in 2009.RBS, which is 84%-owned by the taxpayer, has announced 23,000 job losses worldwide since October 2008, including 17,100 in the UK.It also announced it had sold an 80% stake in its payments business GMS, in a deal which valued the unit at £2bn.


• German insurer Allianz has reported a 46% drop in second-quarter net profit, after seeing an increase in costs related to natural disasters.Allianz said claims from natural catastrophes hit 255m euros ($335m; £210m) in the April-June quarter.Net profit fell to 1.16bn euros from 1.87bn euros last year, when results were boosted by asset sales.However, operating profit jumped 23% to 2.2bn euros, and the firm maintained its outlook for the full year.


• Russia is to ban the export of grain from 15 August to 31 December after drought and fires devastated crops."I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain," Russian Prime Minister Vladimir Putin said.Russia, one of the biggest producers of wheat, barley and rye, exported a quarter of its 2009 grain output.Mr Putin's announcement sent wheat prices to a 23-month high.


• US food giant Kraft has reported higher-than-expected first quarter profit, helped in part by its purchase of UK confectionery maker Cadbury.Kraft said net profit was $937m (£590m), up from $827m in the same period a year earlier earlier.Net revenue rose 25.3% to $12.3bn, boosted by the addition of Cadbury, which it acquired in a controversial takeover at the beginning of the year.Kraft was criticised for breaking pledges over Cadbury plant closures.


• Greece's efforts to tackle its public deficit have had a "strong start", the International Monetary Fund (IMF) and European Union (EU) have said.The comments came after a delegation of staff from the IMF, EU and European Central Bank visited the country to check on the progress.In May, the EU and the IMF agreed to loan Greece 110bn euros ($145bn; £91bn) over three years.An IMF official said he was "confident" Greece would get the next instalment.


• Nigeria's Securities and Exchange Commission (SEC) has fired the director-general of the Nigerian Stock Exchange, Ndi Okereke-Onyuike, and suspended its chairman.The move is being seen as an effort to restore investor confidence following growing fears over governance issues.The action was taken by SEC head Arunma Oteh who took office at the beginning of 2010 promising tougher regulation.The SEC has named ex-Deloitte executive Emmanuel Ikazoboh as its new chief.The former chief executive of Deloitte in West and Central Africa will now be responsible for managing sub-Saharan Africa's second-biggest stock exchange for a caretaker period.


• The Texas Rangers baseball team owned by Liverpool FC co-owner Tom Hicks has been auctioned off for $593m (£374m).It came after Mr Hicks' ownership group defaulted on loans, with the sale being finalised in a US bankruptcy court.The franchise has been sold to a group led by Hall of Fame pitcher and Texas Rangers president Nolan Ryan and Pittsburgh lawyer Chuck Greenberg.Liverpool FC is the subject of a number of potential bids, including from China, which the club is assessing.

BBC Business News 6th August 2010

Hollingsworth Daily Post

• UK banking giant Barclays has reported pre-tax profits of £3.95bn for the first half of 2010 - up 44% on the same period last year.The vast majority of the profits came from the bank's investment banking arm, Barclays Capital, which made £3.4bn.Barclays also said it lent £18bn to UK households and businesses over the six month period.Earlier this week rival HSBC reported first-half profits of £7bn, while Lloyds made £1.6bn.Royal Bank of Scotland will announce its results on Friday.


• Japan's prime minister has suggested the country's economy may need additional stimulus spending.Naoto Kan said that while the economy was still growing, there was concern about the level of unemployment and the health of the global economy.The Japanese economy expanded at an annualised rate of 5% between January and March, but economists say the rate of growth has since slowed.


• Rio Tinto's profits for the January to June period have reached a record first-half high for the firm, fuelled by Chinese demand for its iron ore.The Anglo-Australian group saw its half-year net profits more than triple to $5.8bn (£3.7bn).This compares with $1.6bn for the same six months last year.Earnings from Rio's iron ore operation, the biggest part of its business, more than doubled to $4.1bn, up from $1.9bn a year ago.


• Rupert Murdoch's News Corporation has reported fourth quarter net income of $875m (£551m), against a $203m loss in the same period in 2009.News Corp was helped by the sale of a Bulgarian TV station, cash from a BSkyB legal settlement, and some tax credits.It owns TV stations, film studios, book firms, cable networks and newspapers.


• Air traffic for Ryanair grew by 13% while British Airways flew 2.6% fewer passengers during July when compared with July 2009.Ryanair sold 7.61 million seats last month, smashing a previous record of 6.8 million seats sold in August 2009.BA carried 3.19 million passengers last month, down from 3.21 million in July 2009.BA enjoyed a strike-free July after cabin crew restarted talks about pay and conditions.The long-running dispute has so far cost BA £150m ($240m).


• Shares in Barnes & Noble, the largest US bookstore chain, have jumped 20% after it said late on Tuesday it was considering putting itself up for sale.The chain said it believed its shares were "significantly undervalued".Founder Leonard Riggio said he might make a bid for the struggling retailer, as part of a wider investor group.The chain struggled during the downturn as consumers looked to discount bookstores.

BBC Business News 5th August 2010

Hollingsworth Daily Post

• Quarterly profits at Societe Generale have more than tripled after what it called an "excellent performance" in its retail banking division.The French bank said net profit for the three months to June came in at 1.08bn euros ($1.4bn; £900m) compared with a profit of 309m euros a year ago.The result comfortably beat analysts' forecasts of a 732m euro profit.


• Japanese carmaker Toyota has reported its biggest quarterly profit in two years, with sales recovering as the company seeks to put the recall of millions of vehicles behind it.Toyota made a net profit of 190.4bn yen ($2.2bn; £1.4bn) in the three months to June, bouncing back from a 77.8bn yen loss in the same period a year ago.Group revenues increased 27% on last year to 4,872bn yen.


• Almost three-quarters of the oil spilled in the Gulf of Mexico has been cleaned up or broken down by natural forces, the US government says.White House energy adviser Carol Browner announced on Wednesday that only a quarter of the leaked oil posed any further danger to the environment.The majority has either been captured, burned off, or evaporated, she said.


• Lloyds Banking Group has reported a return to profit for the first half of the year, largely due to a drop in the amount set aside to cover bad loans.Pre-tax profit at the bank, which is 41%-owned by UK taxpayers, came in at £1.6bn, compared with loss of £4bn in the same period a year earlier.Money set aside to cover bad loans fell from £13.4bn to £6.5bn.
  On Tuesday, Northern Rock reported a return to profit for the period, while on Monday HSBC posted a profit of £7bn.


• German sports goods maker Adidas has reported a jump in profits for the April to June quarter thanks to a sales boost from the recent World Cup.The company posted a net profit of 126m euros ($167m; £104m) compared with 9m euro ($12m; £7.5m) a year earlier.Sales were up 13%, reflecting the success of its sales of replica World Cup shirts, boots and balls.


• UK media regulator Ofcom has referred the market for pay-TV movies to the Competition Commission, amid concerns that Sky's role is too dominant.It said it had "reasonable grounds" to suspect that Sky's distribution of major Hollywood films restricted or distorted competition.Consumers were unlikely to benefit from more choice and innovation without intervention, it said.


• Wheat prices have hit a 22-month high after a severe drought and ensuing wildfires in Russia devastated crops.Chicago Board of Trade (CBOT) wheat for September delivery broke through the $7-a-bushel level in US trade for the first time since September 2008, before falling back to $6.93.Prices have risen 50% since late June.


• German carmaker BMW has reported a surge in profits, thanks to a recovery in global markets, demand from China and strong sales of new models.The firm made 834m euros (£692.8m; $1.1bn) between April and June, up from 121m euros a year earlier. Sales climbed by 18.3% to 15.35bn euros.The results impressed investors, pushing the firm's share price up by 3.1% in Tuesday trading.

BBC Business News 4th August 2010

Hollingsworth Daily Post

• The UK's biggest bank HSBC has reported pre-tax profits of $11.1bn (£7bn) for the first six months of 2010 - more than double it profits for the same time last year.The bank said it was profitable in every region, except for North America where it saw losses of $80m.HSBC shareholders will receive a second dividend this year, totalling $1.4bn.


• Former chairman of the US Federal Reserve, Alan Greenspan, has warned that the US economy could be heading towards a double-dip recession.There is currently a "pause" in the US recovery, he told US television, so that it feels like a "quasi-recession".When asked if the US could fall back into recession, he replied, "It is possible."


• The iPhone manufacturer Foxconn has reopened a factory in India which was shut down temporarily when 250 workers fell sick, sending its shares up 9%.The plant in Madras (Chennai), which makes mobile phone parts, was closed last Monday after workers complained of nausea and giddiness.Work resumed on Saturday after the firm received clearance from the government.


• French bank BNP Paribas has seen its second-quarter profit grow, thanks to gains in its retail banking division offsetting declines in its investment banking operations.Net profit for the three months to July rose 31% from a year earlier to 2.1bn euros ($2.7bn; £1.75bn).Retail banking saw "huge revenue growth" driven by strong demand for mortgages, BNP said.


• Two Gulf states have announced bans on some functions of the Blackberry mobile phone, claiming security concerns.The United Arab Emirates is to block sending e-mails, accessing the internet, and delivering instant messages to other Blackberry handsets.Saudi Arabia is to prevent the use of the Blackberry-to-Blackberry instant messaging service.


• Chinese manufacturing output grew at its slowest rate for 17 months in July, as the government continues efforts to rein in rapid economic growth.The official purchasing managers' index of manufacturing output fell to 51.2 in July from 52.1 in June, said the China Federation of Logistics and Purchasing.Analysts said the slowdown came as banks continue to make it harder for firms to borrow money.


• Pan-Asian restaurant chain Wagamama is being put up for sale by its private equity owner, it has been reported.Majority owner Lion Capital is hoping to sell the company for as much as £250m, according to the Sunday Times.The UK private equity group, which bought an 88% stake in Wagamama for £102m in 2005, has not been available for comment.

BBC Business News 2nd August 2010