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Frontier Markets Are The Secret Untapped Resource (BlackRock Blog)
Frontier markets — the emerging markets of tomorrow — are an untapped resource for investors, argues Heidi Richardson.
“We believe these developing economies offer significant long-term growth potential as well as diversification benefits thanks to their relatively low correlation to many major asset classes, among other reasons,” Richardson writes.
Richardson recommends the iShares MSCI Frontier 100 ETF (FM) for three reasons: First, it offers pure frontier markets exposure. Second, it’s well-diversified. And third, that index is biased towards liquidity.
Clients Decide How They Feel About An Advisor In Less Than 5 Seconds (Advisor Perspective)
It only takes clients “five seconds or less” to decide on how they feel about an advisor, writes Dan Richards. So advisors should be prepared to make a great — and lasting — impression within those initial seconds.
The first thing that clients notice is energy level, and specifically whether or not the advisor projects a sense of confidence. “To project confidence, you have to be fully engaged and set aside all distractions. That means that you should review the prospect file beforehand, so that you aren’t scrambling for a last-minute review of notes,” writes Richards.
Additionally, advisors should dress “to their marketplace”, and when in doubt they should definitely wear clothes on the conservative end.
Passive ETFs Are Too Concentrated To Be The Key To Emerging Markets (Investment News)
Many investors choose passive ETFs because they believe that they offer low-risk and inexpensive exposure to EM markets. However, there are major problems with the construction of these ETFs, “primarily based on the methods used to build the underlying indexes,” argues Tim Atwill.
“First, both the MSCI and FTSE Emerging Markets indexes are quite concentrated. In both indexes, China represents close to one-fifth of the underlying portfolio, and the top five countries represent over 65% of the exposure,” Atwill writes.
A concentrated portfolio is risky because that concentrated position will drive the portfolio’s performance. China, for example, is seeing converging economic growth — which will likely negatively affect both of these indexes.
Quality stocks are relatively cheap right now for several possible reasons. First of all, investors might be mispricing quality stocks because they aren’t “appreciating their strong and persistent pricing power,” writes Samuel Lee. Most investors tend to focus on earnings over the next few quarters, maybe years, but quality stocks realise their advantages over much longer time horizons.
Additionally, “investors are forecasting slower per-share dividend growth for quality stocks relative to the market. Since the end of the financial crisis, lower-quality firms have been quickly raising their dividends from extremely low levels. Financial institutions have had their dividends suppressed by regulators, and this may change,” writes Lee.
Merrill Lynch And An Ex-Employee Are Standing Trial In Italy For A Bond Deal From 2003 (The Wall Street Journal)
Bank of America Merrill Lynch and one of its former employees are being ordered by a tribunal in the Italian city of Bari to stand trial over a losing bond deal.
“Prosecutors accuse the former bank employee of fraud related to the issuance of an €870 million bond in 2003 and a derivatives contract associated with it. In particular, prosecutors allege that the bank’s employee didn’t properly inform its client of the risks of these financial situations,” writes Giovanni Legorano.
The bank itself has to stand trial because “it is accused of having failed to prevent unlawful conduct by its employee.” Merrill Lynch denies any wrongdoing, and it putting “its maximum trust in the Italian justice system,” writes Legorano.
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