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LONDON, Oct 10, 2014 - (ACN Newswire) - "In the low return environment that we foresee, there is a strong reason to refocus on 'Return of Capital and Return on Capital', which requires a cogent investment process as the foundation of the wealth management business," recommends Homiyar Vasania, Chief Executive Officer, River Valley Asset Management.
River Valley Asset Management is a fund management company at the marcus evans Private Wealth Management APAC Summit 2014, in Kuala Lumpur, Malaysia, 27 - 29 October.
- What is challenging private wealth managers in the region today in their attempts to add value to wealth portfolios?
The biggest challenge is that there is no easy money to be made any more. Fixed income returns are low and leveraging has run its course. Conventionally favoured asset classes like property and fixed income seem less attractive. Hence we have to revert to understanding, managing and taking more risk.
A wealth manager's function is increasingly moving towards that of an institutional fund manager. Entities that combine the service levels and transparency of a conventional private wealth manager with the investment expertise and insight of an institutional fund manager will have an edge.
- How does this impact private wealth management?
Wealth managers need to have a robust and consistent investment philosophy and process. RVAM's long-term investment construct is based on a macro environment of low growth and low interest rates. Our total return expectation is therefore appropriately calibrated. The upside to low growth is an improvement in corporate free cash flow. Consequently, a larger proportion of total return would come from cash returns rather than purely growth.
We are increasingly finding many strong, steady businesses with lower than historic growth but improving balance sheets and stronger cash generation. These excite us as their ability to generate cash return is high. The market consistently undervalues "steady" and "predictable" and overvalues "growth"; hence the businesses we like are cheaper than they should be. Our process is focused towards gaining from this anomaly. Though ours is an "all season" investment philosophy, it becomes particularly potent in low interest rate environments like the current one.
- How do you gain from this anomaly?
The returns from our targeted assets would be less volatile and more likely to beat long-term returns from most other asset classes. We expect nearly half of our total returns to come from cash coupons (either dividend or interest). This is not dependent on the market, but only on the performance of the business. Total return is thus anchored around this cash coupons number.
Consequently, we prefer companies with higher-than-market dividends and free cash flow - ones with "steadier" and "more predictable" businesses which, in turn, have lower stock price volatility. This also allows us to maintain moderate portfolio leverage to enhance returns; due to the current low cost of funds, this is a low risk return enhancement.
- What risks could this investment style bring on board? How could they be avoided?
This type of investment style could underperform in a strong bull market but even then the absolute return would be on target. In a quickly rising interest rate environment, this portfolio could have a pause in terms of performance, but performance should subsequently continue, as we believe the rise in interest rates would only happen with a better global growth outlook and this portfolio does have leverage to growth.
About the Private Wealth Management APAC Summit 2014
The fifth annual Private Wealth Management APAC Summit is the premium forum bringing elite buyers and sellers together. The Summit offers regional SFOs, MFOs, wealth advisors, and international fund managers and consultants an intimate environment for a focused discussion of key new drivers shaping wealth preservation and investment strategy. Taking place at the Hilton Kuala Lumpur Hotel, Kuala Lumpur, Malaysia, 27 - 29 October 2014, the Summit includes presentations on strategic asset allocation and risk management, co-investment opportunities, family governance, lucrative alternatives to boost returns and more.
For more information please send an email to info@marcusevanscy.com or visit the event website at www.pwmsummit.com/HomiyarVasaniaInterview
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About River Valley Asset Management
A Registered Fund Management Company under MAS, RVAM offers multi asset class investment services via bespoke managed accounts and an offshore fund to accredited investors including family offices and institutions.
RVAM focuses on businesses' cash generative ability to achieve high unlevered return on investment with relatively low volatility.
Homiyar Vasania, CEO, was senior fund manager with Morgan Stanley Asset Management's EM team for 12 years, since March 2000. He directly managed over US$5bn, with his Asia team managing over US$12 bln. www.rivervalleyasset.com.
Contact:
Sarin Kouyoumdjian-Gurunlian
Press Manager, marcus evans, Summits Division
Tel: +357 22 849 313
Email: press@marcusevanscy.com
Topic: Trade Show or Conference
Source: marcus evans Summits
Sectors: Daily Finance, Daily News
https://www.acnnewswire.com
From the Asia Corporate News Network
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