Ciaran Whelan

Investec Bank (Australia)  announced last Friday that its parent company Investec Holdings (Australia), has entered into a definitive agreement with Bank of Queensland (BOQ) to sell its Professional Finance business which includes its deposits business, and its Asset Finance & Leasing businesses in Australia.

The agreement is subject to customary closing conditions such as counterparty and financier consents and approval from the Australian Prudential Regulatory Authority (APRA).

Following the sale, the Investec Group will cease to own an ADI but will retain a significant business in Australia focussing on its core strengths across Corporate and Institutional Banking, Property Funds Management and Investment Banking.

Late last year, Investec announced it had appointed independent advisers to identify alternatives for its Professional Finance and Asset Finance & Leasing businesses.

The businesses are being sold as a going concern with a total team of over 310 people transferring to BOQ.

“The agreement with BOQ represents a significant opportunity for both the Professional Finance and Asset Finance & Leasing businesses as they pursue their next phase of growth,” said Investec CEO Ciaran Whelan.

“Investec Group remains committed to the Australian market. We have an experiencedleadership team with a focused business backed by a strong global balance sheet and parent. We are in a good position to concentrate on what we do best within our specialist niches and to demonstrate our distinctive approach.”

The post Investec to focus on core strengths with the sale of its Professional Finance and Asset Finance & Leasing divisions appeared first on AdviserVoice.

The enormous injections of liquidity via quantitative easing (QE) has created a financial ‘Waterworld’, flooding the global monetary system and significantly altering the investment landscape, according to Investec Asset Management Global Strategist, Dr Michael Power.

Dr Power, who is visiting Australia this week at the invitation of Investec Bank (Australia) Limited, presented an analogy with the 1995 Kevin Costner film, Waterworld, where humans were forced to navigate a submerged world.

Dr Power believes the almost limitless liquidity injected to the global monetary system has melted the monetary ice-caps, in the process destroying the traditional risk-free rate investing anchors – or “dry-land”.

“The concept of risk free investing, where capital invested earns a positive after-inflation return has underpinned fixed income and equity investing in the Western world over the last three decades,” Dr Power said. “However, the liquidity injection of central banks has moved developed markets interest rates underwater, sinking many safe haven returns below inflation.”

Expanding balance sheets

Dr Power explained that the ‘Waterworld’ has been created by the dramatic expansion of central bank balance sheets as governments around the world have taken on further debt since 2008. At the same time, the populations of developed economies of the West and Japan continue to age.

“Quantitative easing, in effect, is a frantic effort by Western and Japanese authorities to stop the natural deflation of their economies as the population ages and the size of their workforces start to shrink as a percentage of total population,” Dr Power said.

“Were technological advances and hence productivity so profoundly positive as to offset this demographic drag, economic growth would remain healthy. However, this does not seem to have been the case and Japan in particular has now endured two lost decades of growth and the question on where to invest is becoming more difficult to answer,” he said.

Where to find dry land?

Dr Power believes that the ultimate destination for capital is “dry-land” – in other words, new safe havens offering new risk free rates with real yields that reset the foundations upon which to base both fixed income and equity investment decisions.

According to Dr Power, the challenge for investors as navigators of capital will be to first preserve capital, navigate macroeconomic headwinds, and set course for emerging opportunities.

“As asset managers, we must see ourselves as the navigators of capital, unanchored from the traditional certainties of a positive-yielding risk-free rate. Our challenge is to choose the appropriate vessel, ensure capital is preserved and deal with the structural changes caused by central bank liquidity as new anchor points emerge,” said Dr Power.

He said many of the anchors will be located in emerging markets, and that inflows to Asian currencies already reflect this changing landscape.

“We believe safe havens should offer investors a risk free real return, not a return free risk, which is becoming increasingly difficult to find in developed markets,” he concluded.

The post Quantitative easing creates investment ‘Waterworld’ appeared first on AdviserVoice.