By 2025, $145 Trillion assets under management will be either directly or indirectly exposed to financial water risk. Physical and financial water risks are the largest threats to people, planet and profit. All investors need to be made aware of this inherent risk factor.

The threats to water resources are significant; pollution, increasing global population, growing cities demanding more water, power generation, climate volatility, food production requirements, floods, drought etc. Severe droughts have caused billions of dollars of damage in Southern Europe and California and increasingly other parts of the world. Research from the World Bank suggest that since 2001, rainfall shocks have caused a loss of food production sufficient to feed about 81 million people every day for an entire year – equivalent to the population of Germany.

Water is often compared to carbon in terms of growing operational and strategic risk that investors need to account for. However, where water and carbon differ in this regard is that today’s water threats move rapidly i.e. they can lead to significant or total value destruction in a far shorter timeframe. Water security can be converted to water risk overnight. Recent examples include; BHP and Vale facing a $50 billion fine stemming from compensation claims, officials in northern India ordered Coca-Cola Co. to close a local bottling plant amid protests that they were extracting too much groundwater, a Chilean drought has hampered production for the nation’s copper miners, and Newmont delayed a $5 billion mining project in Peru after community protests over water concerns.

Investors are trying to integrate water risks into their strategies but they are currently using limited data. Our clients seek to bridge the gap by launching a Water Risk Index which will be the first index worldwide to price financial water risk.

The Index tracks corporate management of and action on water security. It informs asset owners, financial institutions and investment managers of the water risk to equities in their financial portfolios. Every security is exposed to financial water risk, which to date has no viable tool or methodology to assess and price this risk.

 Ken Carmody.

 For more information click here or contact us.

The millennial generation (born from 1982 onwards), who are set to profit from one of the greatest wealth transfers in history, puts travelling and corporate social responsibility high upon their list of wants and requirements. This generation wants to know with certainty that choosing their hotel means staying where a sustainable, responsible approach to the environment is paramount. Thus, the popularity of corporate social responsibility (CSR) is increasingly important in the arena of hospitality. We are seeing certain hotels and resorts leading the way in implementing noteworthy programs to further advance their CSR practices into services or amenities.

One of our clients is a proponent of such practices and intends on building a five star hotel resort in harmony with the environment and the people of an idyllic untouched Caribbean island. This project has the support of the local government who have welcomed such a green initiative designed in line with the stunning natural surroundings.

This is exactly the type of resort that high-end, modern travellers and CSR-minded investors have been searching for. Such a project contributes to preserving the environment and landscape, whilst monitoring the impact of it’s model and promoting awareness about sustainability among stakeholders and others.

A unique opportunity has arisen to invest in this development as a founding member, taking equity within the development company and being afforded significant benefits alongside this. Please click for more information.

If you are interested to learn more please contact us at mkt@finscoms.com

+353 1295 3844

www.finscoms.com

Many funds prior to the recession were heavily reliant on their relationships within the investor community. The recession came and many investors suffered poor returns. Consequently, investors reconsidered their strategies and risk management. Investors looked to alternative ways and because direct approach in a digital world has taken centre stage, many investors upon research have decided on a direct investment approach.

My research for this article showed much has been written on this topic in trade press, spoken at conferences and so forth, what could I add to this topic that hasn’t already been said? In a recent discussion with a PE Manager, analytics showed they received 3000 approaches from funds, the majority of which were poorly written pitch book’s/prospectus’s/marketing materials, only 5 of the 3000 gained a commitment, that’s a lot of work and effort for very little reward?!

Clearly funds need help in their route to the investor, of more importance however is for funds to invest in first impressions to the direct investor, what I mean by this is the investor is looking for the next fund online, using smart phones to make an investment, and they are making use of Artificial Intelligence (AI)/Algorithm’s to find the highlights in a prospectus/pitch book – investors are taking direct control. How prepared are funds to target/market effectively to the inbound investor? For example a PE department within a pension fund are reaching out to a fund directly, family offices might have become their own LP’s/investing capital directly?

For example if the fund invests into a website with a function (not just another brochurial site), digital marketing, then this is where the direct investor gains the first impression, researches more about the fund, we have seen good conversion rates of the direct investor making a direct enquiry on well written and well designed websites, it has to be all about telling a good story, a premium brand, a track record, investment strategy, and so on. Ticks the right boxes and you can engage with the direct investor.

If marketing materials are rewritten with AI in mind, if marketing strategies communicate to those using smartphones, this is a very efficient way to raise capital for little cost. This is what we do at Finscoms.

Don’t get me wrong it is possible for a fund to raise capital through the handshake/roadshows etc, but that the direct investor is where the action is at…

We are entering a new era for funds, one that is more transparent, more competitive and more regulated than ever before. And as such, you, the client should benefit from the greater transparency being adopted by the majority of funds. It is now no longer acceptable that a client sits and waits in the dark until the fund releases mandatory fund performance figures, the new era will see clients accessing performance related data on demand. It is no longer acceptable that you, the investor gets bombarded by unsolicited, indigestible fund prospectuses. Funds will, if they are to prosper, only target appropriate investors. If this epoch of the funds sector’s evolution is to be encapsulated under a single term it would be the ‘Communication Era’.

The fund sector is heavily congested and even though fund strategies may be heterogeneous it is still difficult to differentiate one from another when only given figures within tight parameters. So how do you find the funds that will deal with you through the most transparent processes? The funds that adopt best communication strategies to keep their clients edified are the funds that stand out in this congested market, they are the funds that convey their engaging story as well as the important financial figures to you from the outset. These players realise that their story is far more memorable to an investor than numbers alone.

The top 10% of best performing funds are successful because communications are an important and proven part of their strategy. According to Fund Radar, more than 70% of funds don’t reach their AUM objectives. Studies have shown that a great part of this failure is down to poor or zero communication strategy when attempting to raise capital. This year, research from the University of Pennsylvania and Southern California calculated that a “1bp increase in marketing expenses leads to 1% increase in a fund’s size”. The best performing funds know that every link in their chain must be strong, if an investor is let down by the marketing and communications side of a fund he/she will inevitably begin to question whether the investment strategies are also sub par.

It is commonplace for asset managers to use complex financial jargon when presenting to investors. Vastly different to the type of language a fund manager would use day to day with colleagues and lacking resonance from the investor’s point of view. A relationship must be built between the asset manager and the investor before any capital is acquired. You are far more likely to build a relationship with an asset manager if you have been communicated to at your level. Asset managers should no longer rely on tired industry rhetoric. Strictly presenting figures on performance, portfolio diversification, portfolio risk management etc…no longer engages the majority of investors. You are now interested in ‘the story’ behind the fund along with the figures as a differentiator.

Creating a better client experience mutually benefits both investor and asset manager. This has led to an increase in the use of open, transparent and well-designed communications to investors. By allowing you to see how well the fund is being managed, the relationship will solidify. There is plenty of scope for this;

• NAV publication
• Meeting requirements in relation to Key Investor Information Documents
• Publication of semi-annual and annual financial statements
• Shareholder notifications
• Notices for Shareholder General Meetings
• Key performance indicators such as investment performance versus benchmark
• Factsheets
• Newsletters
• Blogs
• Online investor portals

Family offices’ own capacity to market themselves can also be tested when, for example, trying to partner with others to invest in a niche that they have identified. Communicating a new opportunity to others may not be successful. Very often they don’t have internal marketing resources and, once they are in such situation, they have to engage with Communication specialists who can help.

The facts, the stats, and our experience at Finscoms show that there is substantial room for improvement around fund communication and establishing the best route to the investor. Consistent communication with investors around the lifecycle of the fund is a critical issue for long-term success. KPMG stated in its Spotlight on the Asset Management Industry that “Achieving a better client experience is a source of competitive advantage, not just a ‘nice to have”. When choosing your next fund, first class communications should be a strong consideration for family offices and their clients, choose a fund that shows you the upmost respect.

The white paper addressed to US and non-EU Alternative Investment Fund Managers entitled “Future of Fund Distribution under AIFMD”, describes the current status and foreseeable developments in the regulation governing distribution and private placement of alternative funds in Europe.

The Alternative Investment Fund Manager Directive (AIFMD) provides authorised European Alternative Investment Fund Managers (EU AIFM) with a marketing passport. Leveraging on the very successful experience of the marketing passport introduced by the UCITS Directive, the AIFMD marketing passport allows for the marketing across Europe of EU Alternative Investment Funds (EU AIF). The AIFMD indeed contains provisions also for the extension of such marketing passport to non-EU AIFMs, upon release of positive advice from ESMA on a list of non-EU domiciles and ensuing delegated acts from the European Commission. Whilst two sets of advice were issued by ESMA in 2015 and 2016 respectively, there is still at the date of this paper no delegated act from the European Commission on the extension of the passport, nor we can predict when any such act will be issued, if at all.

About Us

Veneziano & Partners is an international consulting boutique specialised in the European regulation of cross-border fund distribution. In catering to a selected group of investment managers, hedge fund managers and financial institution worldwide, the firm offers a custom-made global fund registration service, enabling its clients to gain competitive advantage in an ever increasingly regulated environment.

Ken Carmody