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Wealth Management Professional Interest Forum. Tuesday 13 th May 2008 Chairman: Christopher Jones-Warner FSI. Wealth Management Professional Interest Forum. Ruth Martin Managing Director, Securities & Investment Institute. Ruth Martin Managing-Director, SII.

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Wealth Management

Professional Interest Forum

Tuesday 13th May 2008

Chairman: Christopher Jones-Warner FSI

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Wealth Management Professional Interest Forum

Ruth Martin

Managing Director,

Securities & Investment Institute

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Ruth Martin

Managing-Director, SII

The Retail Distribution Review May 2008


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SII and the RDR

Affects all three core areas of SII:

  • Attaining Competence

  • Maintaining Competence

  • Promoting Trust

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The RDRThe FSA’s challenges to the industry in the Feedback Statement of 29th April 2008

  • To develop a framework for common professional standards

  • To propose how the new sales service would work, which will benefit consumers

  • To product providers to change their remuneration models for advisers.

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The RDRThe FSA’s Feedback Statement of 29th April 2008

Our challenge is to the representatives of the whole (retail) industry, and all other stakeholders, to deliver on this apparent consensus for change (the Edinburgh Declaration) that some have issued.….. We are willing to play our part in facilitating discussions and taking whatever other actions that only we are able to progress, but the involvement and cooperation of all relevant industry parties will be vital if the industry is to avoid more direct intervention from us.

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The RDRThe FSA’s Aims for Professionalism and Standards

  • Higher Standards of behaviour

  • Higher level qualifications

  • Higher Standards of on-going Competence (CPD)

  • Better segmentation and labelling of services

  • Greater collaboration between firms, professional bodies, trade bodies and consumers

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Promote Trust


through adherence to

Code of Conduct

With opportunities for

self development

Maintain Competence

Developed by range of CPD


and adopt

SII on-line CPD scheme.

Attain Competence

Assessed by external


SII Model of Competence Developing the Principled Practitioner

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The RDR Attain Competence

  • Historical links to London Stock Exchange

  • Retail sectors covered:

    • Private Client Wealth Management

    • Retail Securities and Derivatives

    • Discretionary Portfolio Management

  • Welcome the raising of standards

  • History of higher level qualifications

    • SII Diploma with strong Wealth Management stream

    • SII Masters in Wealth Management June 2008 – focussed career pathways – take up has demonstrated real demand

  • Threshold qualifications e.g. Cert IM, Investment and Risk

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The RDRMaintain Competence

The CPD Challenge

  • What additional CPD might be needed?

  • Compulsory CPD for Retail practitioners?

  • Strong recommendation to join appropriate professional body

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The RDRPromote Trust

  • Practice Certificate

  • ‘e’ learning ethics module

  • Membership and Code of Conduct

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The RDR Under the “Edinburgh Declaration” a Potential Professional Standards Board might, be responsible for:

  • Better labelling (the “alphabet soup”)

  • Introduction of higher-level qualifications (with transitional arrangements)

  • Making industry-wide Code of Ethics

  • Setting broad CPD standards

  • Developing Practice Certificates linked to all aspects of professionalism (the “Principled Practitioner”)

  • Support and active involvement by of regulators, consumers and statutory and trade bodies

  • Information sharing and discipline.

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Your Comments on the FSA’s and the SII’s professionalism proposals

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Ruth Martin

Managing-Director, SII

The Retail Distribution Review May 2008


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Wealth Management Professional Interest Forum

Ravi Bulchandani

Head of Alternative Investments, Barclays Wealth

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Ravi Bulchandani, Head of Alternative Investments

For Professional Investors Only

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Alternative Investment Opportunities

  • Hedge Funds

    • Lightly regulated investment vehicles with the flexibility to use leverage, short selling and other financial instruments to deliver absolute returns for qualified investors

  • Real Estate

    • Real Estate investments designed to generate income and/or capital gains

    • Both hard assets and indices

  • Private Equity

    • Private investments in companies accessing different parts of the capital structure

    • Generally capital appreciation

Special Opportunities

Occasionally some unconventional themes such as climate change, globalisation, food inflation etc or asset classes such as commodities will offer interesting opportunities

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50% Equity50% Bonds

Alternatives boost a portfolio’s potential

Diversification is crucial to managing a portfolio’s low risk and/or higher returns

Alternatives can generate alpha, driven by the fund manager skills

They provide diversification and may enhance portfolios by improving returns and lowering risk.

Alternatives exhibit low correlation to traditional assets allowing them to profit, and help preserve capital, in rising and falling markets

Expected Return

45% Equity45% Bonds10% Alternative Asset

Efficient Frontier

45% Equity45% Bonds10% Cash


Source: Barclays Wealth

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Diversification benefits

Low correlation to traditional assets, risk reduction and return enhancement

Source: LIBOR, S&P500, Lehman Aggregate Bond Index, Barclay CTA Index, CSFB/Tremont Hedge Fund Index, Venture Economics (time weighted returns), NCREIF National Property Index. Data to Dec 2007.

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A growing appetite for Alternatives

  • A survey of 790 individuals was conducted between January and September 2007 by the Economist Intelligence Unit on behalf of Barclays Wealth

  • The survey compared the assets in which respondents had invested over the past three years with their planned investments over the next three

  • 2 trends stand out:

    • 1. There is a move away from equities

    • 2. Respondents expressed a desire to increase exposure to less traditional assets, such as hedge funds, private equity, structured products & derivatives

Survey suggests a preference to reduce exposure to market returns towards a more stable return profile

The only assets in which respondents expect to increase their investments are private equity, hedge funds, derivatives, structured products & commodities

Source: Barclays Wealth Insights Volume 3 – Risk, Return and Reward

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Hedge funds – gaining from independent performance

Performance of CS/Tremont Hedge Index and Lehman Global Bond Index during MSCI World from 1/1994 to 2/2008

Why favour hedge funds?They take both long and short positions, allowing them to achieve returns in rising and falling markets.

What should you consider? A large initial investment. Identifying the right fund requires a rigorous assessment of managers’ skills and fund performance.

What are the results?

Hedge fund performance, as measured by the CS/Tremont Hedge Index, exhibits low correlation with traditional markets, with lower volatility than equities.

Past performance is not an indicator to future returns. Source: Pertrac, Bloomberg.

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Private Equity profits from active management

US Private Equity Performance vs. US Equities

Why favour private equity?

To gain access to specialist investment strategies not available in the listed market

What should you consider? Long term investment horizon – fund commitments can extend to over 10 years

What are the results?

Private Equity has historically shown strong long term performance

Past performance is not an indicator to future returns. Source: Thomson Reuters US Private Equity Performance Index

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Commodities promote diversification

Why favour commodities?

Commodities offer excellent downside protection, with little to no correlation to market conditions

What should you consider?

Cost of storage – this may be reduced if exposure is gained with other investment products

Lack of any income streams, compared to dividends or coupons

What are the results?

An increase in the portfolio’s risk-adjusted return (see example, right)

Diversification Benefits with Commodities

S&P 500



Annualised Return




Standard Deviation




Sharpe Ratio






  • Using data from Jan 1995 to March 2008, adding 30% commodities (Goldman Sachs Commodity Index, or GSCI) to a pure equity portfolio (S&P 500):

    • Lead to reduction in volatility

    • Improve the portfolio’s risk-adjusted return (Sharpe Ratio)

Source: Barclays, PertracPast performance is not an indicator to future returns.

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Managing risk through Real Estate

Cumulative performance (in GBP)

Why favour real estate?

Distributing property investment geographically can improve risk-adjusted portfolio returns.

What should you consider?

The choice between direct or indirect real-estate investments depends on your liquidity needs, volatility tolerance and return objectives

What are the results?

Investing directly in real estate provides diversification benefits. Correlation between UK RE and FTSE 100 0.27 for this time period

Source: Barclays Wealth and Bloomberg. The chart shows performance of the indices over the period since Jan 2003-Mar2008 with the indices rebased to 100. Past performance is not an indicator to future returns.

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Alternative Investments – The Risks

Source: Barclays Wealth

Limited liquidity - Due to the nature of their investments, alternatives tend to offer less favourable liquidity terms than traditional asset classes.

Limited transparency – Lack of information, potentially leading to style drift.

Limited regulation – Alternatives may not be subject to similar rigorous scrutiny as traditional assets regulation.

Key man risk - Alternative Investments performance may be contingent on a lead portfolio manager.

Business & operational risk – Smaller firms may not have adequate infrastructure.

Leverage risk – Managers use varying degrees of leverage, fat tail risk may increase as leverage increases.

Access & capacity – Alternatives may require high minimum investments and a close relationship to gain access.

Pricing – Alternatives may be difficult to value and the frequency of valuation may vary.

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This document has been issued and approved by Barclays Bank PLC. Although information in this document has been obtained from sources believed to be reliable, we do not represent or warrant its accuracy, and such information may be incomplete or condensed. This document does not constitute a prospectus, offer, invitation or solicitation to buy or sell securities and is not intended to provide the sole basis for any evaluation of the securities or any other instrument, which may be discussed in it. All estimates and opinions included in this document constitute our judgement as of the date of the document and may be subject to change without notice. This document is not a personal recommendation and you should consider whether you can rely upon any opinion or statement contained in this document without seeking further advice tailored for your own circumstances. This document is confidential and is intended solely for the addressee(s). If you are not an addressee, or have received this document in error, please notify the sender immediately, delete it from your system and do not copy, disclose or otherwise act upon any part of this e-mail or its attachments. It may not be reproduced or disclosed (in whole or in part) to any other person without our prior written permission. Law or regulation in certain countries may restrict the manner of distribution of this document and persons who come into possession of this document are required to inform themselves of and observe such restrictions. We or our affiliates may have acted upon or have made use of material in this document prior to its publication. You should seek advice concerning any impact this investment may have on your personal tax position from your own tax adviser.

Barclays Wealth is the wealth management division of Barclays and operates through Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is registered in England and authorised and regulated by the Financial Services Authority. Registered number is 1026167 and its registered office is 1 Churchill Place, London E14 5HP.

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Wealth Management Professional Interest Forum

Robert Brown

Chief Executive,

Pan Asset

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Global investors across all major asset classes

Using Exchange Traded Funds to Add Alternative Assets to Private Client Portfolios

SII Wealth Management Forum

13th May 2008

Perspective - Analysis

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Perspective - Analysis

What Are Exchange Traded Funds and What Are Their Advantages?

  • Index tracking investment funds that are listed on the stock market. First launched in 1993, as at Dec 2007 there were some1,200 ETFs listed globally with $800bn of assets. Leading providers in Europe include Barclays (iShares), Soc Gen (Lyxor) and Deutsche Bank (db-X Trackers).

  • Diversification - one trade gives you diverse exposure to the chosen asset class and many previously inaccessible asset classes become investible

  • No Active Manager Risk - you do not run the active manager risk of underperforming badly

  • Assured Liquidity – can be traded throughout the dealing day

  • Convenience - normal settlement, custody and dividend payments

  • Transparency - you know exactly what your investment exposure is

  • Low Costs - tight bid/offer spreads, no front end or back end fees, low annual fees and no Stamp Duty on secondary market purchases


Pan-Asset Capital Management Limited is authorised and regulated by the Financial Services Authority

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Perspective - Analysis

The Exchange Traded Fund Universe


Pan-Asset Capital Management Limited is authorised and regulated by the Financial Services Authority

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Global investors across all major asset classes

This document is provided for information and discussion purposes only and does not constitute an

offer to sell or a solicitation of an offer to purchase any security or any other investment or product.

This document is intended for authorised recipients only and must be held strictly confidential. 

This document may not be reproduced or distributed in any format without the express written

approval of Pan-Asset Capital Management Limited.

The value of investments and the income from them can go down as well as up and you may not

recover the amount of your original investment. Past performance is not necessarily a good indication

of likely future performance.

Vestry House

Laurence Pountney Hill

London EC4R 0EH

Tel 020 7398 5840

Fax 020 7398 5849

[email protected]


Pan-Asset Capital Management Limited is authorised and regulated by the Financial Services Authority


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Wealth Management Professional Interest Forum

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