Wealth management in commodity economies – March 2018

Wealth management =

investment consulting

+ advanced planning

+ relationship management

Commodity economies suffer from the “paradox of plenty”

The results are usually decreased competitiveness due to fx appreciation in a first step, then crowding-out by the commodity business of other productive activities in the country, which lead to worsened balance of payment terms, possibly foreign indebtedness ending up in local currency de-basing and in the worst cases political and social instability.

This in turn discourages FDI which decrease altogether.

The typical solution would be dollarisation. However, wealthy local entrepreneurs usually want to preserve a link with their home country and to contribute to the local social and economic improvement.

The challenge is to immunize wealth from the local country risks and at the same time preserve and manage exposure to local activity.



The case of Hedge Fund ETFs – June 2016

H. Markowitz publishes “Portfolio Selection” in 1952 and “creates” MPT.

W. Sharpe advocates for a single “market” portfolio in his CAPM  in 1964.

B.G. Malkiel publishes ” A random walk down Wall Street” in 1974.

J.C. Bogle/Vanguard create the first Index tracker in 1975.

MSCI issue the first factor-based indices in 1998.

Merrill Lynch and Goldman Sachs look for hedge fund replication factors by 2004 -05.

By 2009, many institutions have already gone to HF strategy indices.

www.hedgefundreplication.com publishes a HF benchmark and studies show that 85% of HF performance can be replicated, the remaining 15% vanishing in fees.

HF holdings are likely to evolve towards core (HF replica) – satellite (single HF) holdings of a new type.